Parker v. Wakelin, Civ. No. 94-157-P-C.

• Decision Date: 03 April 1995
• Docket Number: Civ. No. 94-157-P-C.
• Parties: Richard M. PARKER, et al., Plaintiffs, v. David S. WAKELIN, et al., Defendants.
• Court: U.S. District Court — District of Maine

882 F. Supp. 1131

Richard M. PARKER, et al., Plaintiffs, v. David S. WAKELIN, et al., Defendants.

Civ. No. 94-157-P-C.

United States District Court, D. Maine.

April 3, 1995.

COPYRIGHT MATERIAL OMITTED

Kaighn Smith Jr., Donald F. Fontaine, Fontaine & Beal, P.A., Portland, ME, for plaintiffs.

H. Cabanne Howard, Asst. Atty. Gen., Augusta, ME, for defendants.

MEMORANDUM AND ORDER GRANTING IN PART, AND DENYING IN PART, DEFENDANTS' MOTION TO DISMISS

GENE CARTER, Chief Judge.

Plaintiffs, the Maine Education Association ("MEA") and four classes of public school teachers as members of the Maine State Retirement System ("MSRS") brought this action seeking declaratory and injunctive relief and challenging amendments enacted by the Maine Legislature in 1993 which modify certain aspects of the MSRS ("the 1993 amendments"). P.L.1993, ch. 410, Part L, §§ 12, 13, 28, 31-37 (codified as amended at 5 M.R.S.A. §§ 17001, 17701-B, 17806, 17851, 17852). Defendants filed a Motion to Dismiss (Docket No. 11). After briefing and oral arguments by the parties, this Court concludes that the motion should be granted in part and denied in part.

To resolve Defendants' Motion to Dismiss, the Court must accept as true all factual allegations in the Complaint, construe the record in favor of Plaintiffs, and decide whether, as a matter of law, Plaintiffs could prove no set of facts which would entitle them to relief. Snyder v. Talbot, 836 F.Supp. 19, 22 (D.Me.1993). The facts as stated in Plaintiffs' Complaint are set forth below.

I. FACTS

Defendant MSRS operates as a public pension trust and was established pursuant to Maine law for the purpose of providing benefits to most state employees, including public school teachers, and employees of certain "local districts" which elect to participate in the system. See 5 M.R.S.A. §§ 17001-18663. Membership is mandatory for all four classes of Plaintiffs here. The MSRS is considered to be a "defined benefit system," in that the precise retirement benefits provided for teachers are defined upon employment and financed by their fixed contributions to the trust administered by MSRS, combined with the contributions from the State as their employer. The contributions are determined by a set percentage of the teachers' salaries.¹ These rates are determined on the advice of the MSRS actuary.

In 1993, the anticipated appropriation necessary to cover the State's contribution to the fund was estimated to be $404,000,000. In order to lower the amount of that appropriation, legislators enacted certain amendments modifying the MSRS. P.L.1993, ch. 410, Part L (effective July 1, 1993). The particular amendments challenged in this case affected Plaintiffs in several respects: (1) raising the teachers' required contribution from 6.5% of their annual salary to 7.65%; (2) capping the salary increases that may be included in the calculation of the teachers' retirement benefits; and (3) delaying by six months the cost-of-living adjustments to the teachers' retirement benefits. P.L.1993, ch. 410, Part L §§ 13, 28, 31.

While those changes were made to all teachers' pensions, certain other modifications affected only those teachers whose right to retirement benefits had not yet "vested":² (1) increasing the retirement age from sixty to sixty-two years of age; (2) increasing the early retirement penalty (imposed if an employee retires after twenty-five years of service but prior to reaching age sixty-two) to loss of all retirement benefit income from 2.25% to 6% per retirement year preceding age 62; and (3) eliminating the inclusion of per diem payment of up to thirty days of unused sick leave or vacation pay in the calculation of "average final compensation" to determine the amount of retirement benefits to be paid. P.L.1993, ch. 410, Part L §§ 12, 35, 37.

Plaintiffs filed this action challenging the constitutionality of the 1993 amendments and seeking injunctive and declaratory relief blocking the implementation of these amendments. This Court certified four classes of Plaintiffs, each of which set forth different claims, as discussed below.

II. ANALYSIS

A. The Class I Claims

This Court certified the Class I Plaintiffs as, "all non-retired public school teachers in the State of Maine who were members of the Maine State Retirement System as of June 30, 1993, and all retired teachers in the State who have retired since March 1, 1994." (Docket No. 7). These Plaintiffs seek relief under three legal theories: (1) violation of their rights under Article I, section 10 of the United States Constitution ("the Contract Clause") (Count I); (2) violation of their rights under the Due Process Clause of the Fourteenth Amendment of the United States Constitution (Count II); and (3) violation of their rights under the Equal Protection Clause of the Fourteenth Amendment (Count III). The Court will address each claim in turn.

1. The Contract Clause Claim (Count I)

Class I Plaintiffs allege that the 1993 amendments impair their contractual rights as members of the MSRS.³ This Court has previously set out the requirements of a claim alleging a violation of the Contract Clause: "the threshold inquiry for this type of claim is `whether the state law has, in fact, operated as a substantial impairment of a contractual relationship.'" Lovell v. Peoples Heritage Sav. Bank, 776 F.Supp. 578, 592 (D.Me.1991) (quoting Energy Reserves Group, Inc. v. Kansas Power and Light Co., 459 U.S. 400, 411, 103 S.Ct. 697, 704, 74 L.Ed.2d 569 (1983)). Therefore, there are three components to such an inquiry: "whether there is a contractual relationship, whether a change in law impairs the contractual relationship, and whether the impairment is substantial." Lovell v. One Bancorp, 818 F.Supp. 412, 422 (D.Me.1993) (quoting General Motors Corp. v. Romein, 503 U.S. 181, 186-88, 112 S.Ct. 1105, 1109-10, 117 L.Ed.2d 328, 337 (1992)).

Plaintiffs argue that their Complaint satisfies the first component, the existence of a contractual relationship, not by way of an express contract, but through the operation of the overall MSRS statutory scheme. A significant consideration at this stage of the analysis is of what persuasive effect, if any, is the opinion of the Maine Supreme Judicial Court, sitting as the Law Court, in Spiller v. State, 627 A.2d 513 (Me.1993). That case, in which Plaintiffs here appeared on appeal as amicus curiae, was a challenge by members of the Maine State Employees Association, who are also mandatory members of MSRS, against the amendments to the MSRS statutory scheme enacted in 1991.⁴ The Spiller plaintiffs sought relief from the amendments for a purported violation of the Contract Clause. The Maine Superior Court interpreted the MSRS statute to provide the plaintiffs with contractual rights and further found that, although reducing the state's deficit was a legitimate public purpose, these contract rights had been substantially impaired as a result of the 1991 amendments.

The Law Court reversed the Superior Court's holding. The Law Court made a preliminary observation: "Under time honored rules of construction, a statute will not be presumed to create contractual rights, binding future legislatures, unless the intent to do so is clearly stated." Id. at 515 (citing National R.R. Passenger Corp. v. Atchison, T. & S.F.R. Co., 470 U.S. 451, 465-66, 105 S.Ct. 1441, 1451, 84 L.Ed.2d 432 (1985)). In accordance with that principle, the Law Court concluded:

In the retirement statute being construed here, not only is there no clear indication of a legislative intent to create immutable contractual rights for all state employees, the statutory language compels a contrary conclusion. Sections 17050 and 17051, relied on by the plaintiffs, do not create contractual rights. Rather, they state general policy principles, none of which are changed by the enactment of the 1991 amendments.

Spiller, 627 A.2d at 516. The court also held that section 17801 of the statute precluded a finding of an intent to create contractual rights through the enactment of MSRS. The court reasoned that the implication of that section, which provides that future legislation may not reduce the benefits of any members that were actually due at the time the reductions go into effect,⁵ was that the legislature reserved the power to modify prospective retirement benefits for employees to whom benefits were not due. Id. The court also found that there was no due process violation in the enactment of the 1991 amendments. Id. at 517 n. 12.

Defendants argue that the Spiller decision is "dispositive" of a substantial portion of this action. This Court disagrees. It is for this Court to determine what effect and weight is to be given to the Law Court's conclusions in Spiller. The mere fact that the holding in Spiller is directly contrary to Plaintiffs' position here is not a sufficient basis in itself to grant full deference to the Law Court's decision and dismiss Plaintiff's claim. Rather, this Court will examine the authority and record that served as the basis for the Law Court's conclusion to determine whether it can properly serve as persuasive authority for the issues raised in this motion.

Plaintiffs contend that the Law Court's decision should not bind this Court and attempt to distinguish the Spiller decision on several bases. For example, Plaintiffs point out that the classes certified here include not only employees whose benefits have not yet vested (like the Spiller plaintiffs), but also include all teachers who are members of the MSRS since the 1993 amendments affected, inter alia, the annual contribution rate of all teachers. Plaintiffs also argue that the issue of whether contract rights were created was never briefed, argued, or otherwise presented to the Law Court.

This Court, for several reasons, is reluctant to adopt the holding in Spiller and dismiss this claim. As a preliminary matter, it should be noted that this Court has previously acknowledged that "...